The Average Net Worth For The Above Average Person

Everything is relative when it comes to money. If we all earn $1 million dollars a year and have $5 million in the bank at the age of 40, none of us are very wealthy given all our living costs (housing, food, transportation, vacations) will be priced at levels that squeeze us to the very end.

As such, we must first get an idea of what the real average net worth is in our respective countries, and then figure out the average net worth of the above average person!

The Average Net Worth For The Above Average Person

Everything is relative when it comes to money. If we all earn $1 million dollars a year and have $5 million in the bank at the age of 40, none of us are very wealthy given all our living costs (housing, food, transportation, vacations) will be priced at levels that squeeze us to the very end.

As such, we must first get an idea of what the real average net worth is in our respective countries, and then figure out the average net worth of the above average person!

Not bad. But these numbers are skewed by the super rich who have generated an enormous amount of wealth since the financial crisis.

Although the average net worth for all Americans is $692,100, the median net worth is a more pedestrian $97,300.

Let’s look at the average net worth for above average people.

The Above Average Person is loosely defined as:

1) Someone who went to college and believes grades and a good work ethic do matter.

2) Does not irrationally spend more than they make.

3) Saves for the future because they realize at some point they no longer are willing or able to work.

4) Takes responsibility for their own actions when things go wrong and learns from the situation to make things better.

5) Takes action by leveraging free tools on the internet to track their net worth, minimize investment fees, manage their budget, and stay on top of their finances in general. Once you know where all your money is, it becomes much easier to optimize your wealth and make it grow.

6) Welcomes constructive criticism and is not overly sensitive from friends, loved ones, and strangers in order to keep improving. Keeping an open mind is critical.

7) Has a healthy amount of self-esteem to be able to lead change and believe in themselves.

9) Has little-to-no student loan debt due to scholarships, part-time work, or help from their parents. Our parents have saved and invested through the largest bull market in history. It’s understandable that parents want to help their children out.

Now that we have a rough definition of what “above average” means, we can take a look at the tables I’ve constructed based on the tens of thousands of past comments by you and posts I’ve written to highlight the average net worth of the above average person.

The Above Average Net Worth Deconstructed

First, we must highlight what the average tax-deferred retirement savings plan is for those in America. We’ll focus on the simple 401K system we have here where one can contribute $18,000 a year, even though the maximum contribution amount is now $19,000 a year in 2019.

This chart can be used as a rough estimate for those with the RRSP plan in Canada and retirement plans in Europe and Australia as well.

In fact, any country that has any sort of tax-deferred retirement plan and social safety net program for retirement that has a GDP/capita of $30,000 or more can use the below chart as an aspirational guide.

Remember, we are talking about the “above average person.”

Financial Samurai 401(k) Savings Guide

The assumption here is that the above average person is able to start maxing out their tax-deferred retirement plan every year after the second full year of work, and continue on without fail until 65.

The low and high end account for a conservative 0% return to a more historical 7% – 9% constant rate of return. Of course you can lose money if you are unlucky and make much more if you are good and lucky.

Given the 401k maximum contribution limits have increased over time, the three columns from left to right can also be used as guidance for older savers over 45 years old, middle aged savers between 30 – 45, and younger savers under 30 who get to max out at $19,000 a year at the minimum for the majority of their careers.

For example, when I started contributing to my 401k in 1999, the maximum contribution limit was only $10,000. If you are a 40 year old, it’s best to focus on the Mid End column as a guidance rather than the other two.

This chart does not take into consideration any after-tax savings post 401K contributions, but the high end does include 401k company contributions, as this is common for those with seniority and those who work at profitable, generous companies.

For example, for the last five years, my company paid out more than $20,000 a year in profit sharing.

Financial Samurai Post-Tax Savings Guide

The above chart assumes on the low end that one saves about $5,000 a year in after-tax income and around $10,000-$15,000 a year in after-tax income on the high-end after maxing out their tax-deferred retirement vehicle.

I’ve tried to keep things as simple as possible, assuming no inflation and no investment returns. I also believe saving $5,000-$15,000 a year in after-tax income is very realistic for the above average person, and probably very easy for many who earn more than $85,000 per person.

Finally, the chart should show you the power of consistency. Every person who wants to be above average financially should target a 20% savings rate after maxing out their 401(k) contribution.